Top Ten Lessons Learned from American Apparel

1. Top Ten Lessons Learned from American Apparel David G. Gabor, Esq. The Wagner Law Group

2. David G. Gabor • Represents clients in: • Litigation • Negotiating and drafting contracts • Handling compliance issues • Creating corporate infrastructure • Drafting employee manuals, handbooks and policies • Training management and employees • Leading companies toward organizational excellence • Skilled negotiator, mediator and investigator

3. American Apparel American Apparel (“AA”) boasts that it has kept its entire operation local while it has become the norm amongst the majority of US apparel companies to move their manufacturing operations abroad to third party vendors. AA is vertically integrated, and operates the largest apparel manufacturing facility in North America. AA prides itself in its marketing and its brand.

4. What This Program is Not • This is not an indictment of Dov Charney • This is not an indictment of corporate decisions or the actions of the Board • This is not a forum to kick professionals while they are down • Nobody is going to get thrown under the bus in this program

5. Why We Are Conducting This Webinar • Negative publicity can cause significant harm to an organization in terms of its impact on employees, market share and the bottom line • The EEOC received 93,727 charges in 2013 • 38,539 charges were filed for retaliation and 27,687 for sex discrimination • EEOC’s monetary recovery totaled $372.1 million

6. Top Ten Lessons Learned • We have created a list of ten lessons that can be learned from what has transpired • Topics on this list can benefit most organizations with at least fifteen employees • The list is not exclusive • The focus is not on AA but on how to help your company

7. Investigation of Complaints • Who conducts the investigation? • What is the purpose of the investigation? • What do you do with the work product/results? • Who knows about the investigation? • What impact does prior investigations have? • How do you protect against retaliation?

8. Missed Opportunities • The opportunity to determine whether an employee is abusive • The opportunity to prevent sexual harassment • The opportunity to refine the culture • The opportunity to avoid unwanted litigation • The opportunity to avoid bad press

9. Confidentiality Agreements The use of confidentiality agreements can be dangerous for internal and external reasons. Internal: They can frustrate the ability for executives to know what is going on. External: The EEOC and the NLRB have recently attacked the legality of confidentiality Agreements.

10. Empowering Human Resources Human Resources (“HR”) can either be an integral part of an organization or it can sit on an island. HR is viewed as little more than a hall monitor by some organizations. That opens the door to abuse. When HR is viewed as an integral part of the team there are endless possibilities.

11. What HR Can Do • Create realistic policies • Create mechanisms to encourage reporting which includes HR, Managers, hotlines, EAP, etc. • Training programs must be effective • Accountability • Avoid conflicts • Maintain employee engagement

12. Executives • Why organizations hire executives such as General Counsel, Chief Executive Officer, Chief Operating Officer, etc. • The roles that these executives fill • The question of loyalty • Loyalty must be to the organization

13. Employment Agreements • Protect the employer and the executive • Use the document to empower the executive to do what is best for the organization • Reduce the ability for the executive to exceed authority • Hold the executive accountable for abuse of authority • Eliminate fear of “doing the right thing” • Leads into perception

14. Perception I am an “at will” employee and am aware that Sam is harassing Jill. What should I do about it? • Tell Sam to stop • Report this to my boss • Report this to Human Resources • Do nothing What factors will influence my decision

15. Ask Questions My favorite clients are the ones who ask me questions before acting. Many HR professionals and in-house counsel call me on a regular basis. Why this is important. Surround yourself with strong resources. Have the ability to “kick the tires” within the company. Strive for receptivity to an open dialogue.

16. Don’t Assume • Confirm that policies are adequate • Appropriate action is taken when issues arise • Makes sure that the left hand know what the right hand is doing • Employee Classification • Proper protocol for requests for accommodations • Protection from charges of retaliation

17. Culture What the culture is vs. what you thing the culture is. “This can never happen in my company.” Figure out what you want the culture to be and then figure out how to get there. “This is what a successful …..looks like.” Be careful when experiencing growth. Set the bar high!!! This should be true for all personnel and their actions and interactions.

18. The Board Organizations that have a Board of Directors have a golden opportunity to do wonderful things. • Business decisions and planning • Financial • Legal • Reporting • Checks and balances • Ensuring retention of the best talent

19. Precedent Actions often speak far more loudly than words. The fact that an action is tolerated sends mixed messages. • He is too important to discipline • The result: a rule is not enforced • Perception: this organization does not care about … • What co-workers know

20. Create Processes That Work Many companies cut corners or create unrealistic programs that will never be followed. • Manuals • Training • Managers/supervisors • Reporting • Auditing

21. Review • Investigations • Confidentiality agreements • Empowering Human Resources • Executives • Employment contracts • Perception

22. Continued • Ask questions • The culture • The Board • Precedent • Create processes that work

23. Thank You One goal of this program was to initiate a dialogue that would help organizations avoid catastrophic media coverage, high stakes litigation and the negative impact on the workforce. We are available to discuss these and other issues that may arise with you.

24. Contact Information David G. Gabor dgabor@wagnerlawgroup.com www.wagnerlawgroup.com • Boston Office • 99 Summer Street, 13th Floor • Boston, MA 02110 • Tel: (617) 357-5200 Fax: (617) 357-5250 • San Francisco Office • 315 Montgomery Street, Suite 904 • San Francisco, CA 94104 • Tel: (415) 625-0002 Fax: (415) 829-4385 • Florida Office • 7108 Fairway Drive, Suite 125 Palm Beach Gardens, FL 33418 • Tel: (561) 293-3590 Fax: (561) 293-3591